TAXATION AND LOCAL GOVERNMENT DEVELOPMENT IN NIGERIA
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1.1 Background of the Study
Ademolekun (2005) noted that one of the recurrent developmental problems facing local government development in Nigeria is dwindling revenue generation as characterized by annual budget deficits and insufficient funds for meaningful growth and viable projects development. This statement implies that local governments have ineffective taxation policies which to a large extent affect their revenue base. Thus, they so much depend on revenue from the federal statutory account.This background brings us to the study of taxation and local government development in Nigeria. Tax has been defined by various authorities and professionals in various ways. Webster’s Dictionary of the English Language defines tax as a charge imposed by government authority on property, individuals or transactions, to raise money for public purpose. Black’s Law Dictionary describes tax as a ratable portion of the produce of the property and labour of the individual citizen, taken by a nation. Tax is a compulsory levy which a government imposes on its citizens to enable it to obtain the required revenue to finance its activities (Adesola, 2008).
Examining the various definitions of tax one observes taxation is very important for any government if it has make any meaningful economic development. Thus, this study is concerned with development at the grass root as being the goals of the local government administration. Thus, in attempt to carryout development at all nooks and crannies of the society, the local government as the tier of government that is nearest to the people is saddled with the responsibility of direct development of the people to a certain level.Development is highly associated with fund, much revenue is needed to plan, execute and maintain infrastructures and facilities at the local government level (Okoli, 2000). The needed revenue generated for such developmental projects, like construction of accessible roads, building of public schools, health care centers, construction of bridges among others are soles generated from taxes, royalties, haulages, fines and grants from states, national and international governments. Thus, the Local government cannot embark, execute and possibly carryout the maintenance of these projects and other responsibilities without adequate taxation. This is the basic reason why development is skeletal at some Local Government councils in Nigeria. The issue of poor taxation is not exceptional to local government in Edo State, and Uhunmwode Local Government in particular. This however pronouncedly affected development negatively in local government councils. In this research project, the issue to address is how far this poor taxation can affect development especially in Uhunmwode Local Government.
1.2 Statement of the Problem
The Local Government Council takes direct care of the grassroots people that is the people in the rural areas. These groups of people sometimes lack essential facilities and condition of modern civilization(Udeh, 2008). They lack pipe bore water to drink, do not have electricity, accessible roads, poor educational infrastructure and facilities to mention but a few. This is one of the major reasons of rural–urban migration of movement. This has made our cities to be congested and increase in many criminal activities.
Based on the above and foregoing assertions, it is oblivious that the impact of poor taxation on the development of the rural area is a serious problem. This might be as a result of poor taxation. If Nigeria is to achieve her desired goal of vision 2020 and possibly meet the millennium development goals (MDGS) target, the issue of taxation must be addressed squarely. Hence the researcher is bothered to find out the impact oftaxation on the lives of people at the rural area and how it has affected development in general especially in Uhunmwode Local Government Area.
1.3 Purpose/Objective of the Study
The broad objective of the research is to evaluate the impact created by taxation on the development of Uhunmwode in Abia State. The other objectives of this study include:
i. To determine the level of modern social amenities available in Uhunmwode.
ii. To find out the level of poverty associated with the rural people as a result of poor development
iii. To make useful suggestions to solve the problem of poor taxation as development depends on revenue generated.
1.4 Research Questions
i. What are the impacts of poor taxation on the development of Uhunmwode?
ii. Are there adequate modern social amenities in Uhunmwode?
iii. Is the poverty level of the rural people high has a result of poor development?
iv. How can taxation in Uhunmwode be improved?
1.5 Significance of the Study
The significance of any human endeavour is measured by its relevance to solving human problems. The findings of this study would help Uhunmwode Local Government to identify the problems associated with taxation and its consequences on development.
1.6 Scope and Delimitation
The study is focused on taxation and local government development. The study also looks at the various tax administrations and especially on how revenue generated from taxes are managed for developmental purpose of Uhunmwode Local Government. The study will cover a period of five years (i.e. between 2005 and 2010).
1.7 Limitation of the Study
The study is focused on the impact of poor taxation and how it affects development of the local government areas. It will also involve the analysis of problems associated wit taxation and its impact on the development of Uhunmwode Local Government.
1.8 Definition of Terms
Some concepts require proper explanation to enhance our understanding of the theme where necessary opinion of scholars will be cited to explain the terms. The researcher will also give some fundamental definition of terms.
Local Government: According to Lawal (2000) Local Government as a political sub-division of a nation in Federal system which is constituted by law and has substantial control of local affairs which includes the power to impose taxes or exact labor for prescribed purpose. According to William Robson (2006) Defined Local Government as involving the conception of territorial, non-sovereign community possessing the legal right and the necessary organization to regulate its own affairs.
Revenue: Public revenue could be defined as the funds generated by the government to finance its activities. In other words revenue is the total fund generated by government (Federal, state, local government/ to meet their expenditure for a fiscal year. This refers also to the grand total of money of income received from the source of which expenses are incurred. Revenue could be internal or external revenue.
Generation: This is the process of sourcing revenue for the local government in carryout their aim and objectives(Udeh O.S. 2008).
Expenditure: Public expenditure refers to the expenses which the government incurs for its own maintenance, in the interest of the society and the economy in order to help other countries.
Tax: Tax can be defined as a compulsory levy by government on goods, services, income and wealth. It provides definite source of revenue for government expenditure. (Udeh O.S. 2008). It is the way by which government obtain extra money. It spent from income of individual and companies. Tax could be direct or indirect tax. A tax is a payment made by the taxpayers and used by the government for the benefits of all the citizens.
Tax Evasion: Tax evasion means illegal reduction in one’s tax liabilities, thereby paying less than the appropriate amounts and not paying at all.
Tax Avoidance: Tax avoidance is the act of streamlining one’s financial affairs within the law so as to minimize the tax liabilities.
Development: According to Ake (2001) development is the process by which people create and recreate themselves and their life circumstances to realize higher levels of civilization in accordance with their own choice and values. It also a type of social change in which new ideas are introduces into a social in order to produce higher per-capital income and levels of living through more modern production methods and improved social organization.
Abba, E U. (2008). Local Government Administration in Nigeria. Onitsha: Abbot Books Ltd.
Okoli, F.C. (2000). Theory and Practice of Local Government. Enugu: Intec Printers Ltd.
Udeh, O.S. (2008). Public Financial Management. Enugu: Malik Enterprises Nigeria.